Q4. (15 marks) RMB exchange rate In the lecture, we introduce an example to show how to determine the RMB central parity rate against USD, after the reform on Aug 2015, The parity rate was based on the formula of 'the closing rate + the theoretical RMB exchange rate to keep the index of a currency basket unchanged over the previous 24 hours'. a) With the following information provided, Initially, we assume that the US dollar/Japanese yen (USDYEN) is 100 and US dollar/Chinese renminbi (USDRMB) is 6.2. Let it to be the base time. RMB6.2 = US$0.6 + 0.4 x * 100. If divided by 6.2, the equation becomes RMB1 = US$0.097 + *6.45 renminbi is measured by a basket of two currencies. Figure out the theorectical RMB exchange rate when USDYEN is 110. b) Assuming that the previous day's RMB central parity rate is 6.1, the closing rate is 6.2, together with your calculated theoretical RMB in part (a), figure out today's RMB central parity rate